UPMC, Highmark reach tentative agreement to settle lawsuits

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Steered by a federal judge to a courthouse room and to spend "as long as it takes" to work out their legal differences, attorneys for Highmark and UPMC reached a tentative deal Wednesday to end four years of litigation.

The two have been involved in contentious antitrust litigation, beginning in 2009. The health care giants agreed Wednesday to have those cases dismissed.

The pact, which must still win a board's approval, won't extend Highmark's in-network contract with UPMC beyond 2014, nor is there any guarantee that it will end the advertising war between the nonprofits.

However, it could eliminate one front in the rivalry between the region's dominant insurer and its leading hospital system.

"We are obviously glad that the parties have resolved their differences and that they can work to serve the public interest, and that is the tens of thousands of folks who rely on the insurance and the delivery of medical services," said Jay Pagni, spokesman for Gov. Tom Corbett.

Others noted that the end of litigation doesn't cancel the pending divorce between the insurer and hospital system that had long served most of the region's residents.

"It may resolve these two lawsuits and get them off the docket, but I don't know that there is any other benefit to this community," said state Rep. Dan Frankel, D-Squirrel Hill, who has co-sponsored legislation requiring that all hospitals accept all insurers. "I don't think it has done anything to move the ball forward in terms of improving access to health care in Western Pennsylvania."

Five attorneys for UPMC and four for Highmark showed up for a morning conference before U.S. District Chief Judge Joy Flowers Conti, who now is overseeing their lengthy court fight that started in 2009.

That's when West Penn Allegheny Health System sued UPMC and Highmark, accusing them of teaming up to stifle competition. When Highmark agreed to buy West Penn, the insurer was dropped from the lawsuit.

In May 2012, a pact mediated under the governor's guidance, by veteran health care executive David F. Simon, included a plank that would end the litigation. But weeks after that deal was signed, UPMC sued Highmark, accusing it of strangling competition -- notably including UPMC Health Plan.

Highmark then declined to move to dismiss West Penn's lawsuit.

Judge Conti on Wednesday first called upon the governor's attorneys -- who participated in the conference by phone -- to mediate the dispute over who must withdraw which litigation, and under what terms.

But the governor's Office of General Counsel told the judge that Mr. Simon was only signed on to mediate the extension of the contract between UPMC and Highmark, and was explicitly not obligated to get involved in any subsequent litigation.

"I'm quite frankly very disappointed that the governor's office is taking this position," the judge said.

"We're disappointed in the judge's comment on that," Mr. Pagni said in a later phone interview. "Government-assisted mediation is extraordinary. These are two private companies. ... OK, we got [the contract extension] taken care of, and we need to step out of it."

Unable to draft the governor's mediator, Judge Conti got tough, ordering the attorneys to her jury room.

"You'll be there as long as it takes," she said.

They emerged a little more than two hours later with what both described as "an agreement in principle."

Asked by the judge for a reading of the terms of the pact, Highmark attorney Margaret Zwisler objected, "because there are reporters here." The judge then instructed both sides to initial the multipage agreement they had reached and provide it to her.

UPMC attorneys said the agreement would end the 4-year-old antitrust case filed by West Penn Allegheny Health System -- now controlled by Highmark -- against UPMC, and UPMC's similar lawsuit against Highmark. UPMC spokesman Paul Wood later confirmed that it "ends all of the antitrust litigation between Highmark, West Penn and UPMC."

Highmark's attorneys said they must first get the approval of West Penn's board, which next meets on Oct. 31.

Judge Conti scheduled a follow-up conference in court on Nov. 25.

Highmark customers won't have in-network access to most UPMC hospitals after 2014. Some hospitals will remain in Highmark's network, including Children's Hospital and Western Psychiatric Institute & Clinic, as well UPMC Northwest near Oil City and UPMC Bedford Memorial.

On Wednesday, the Erie Times-News reported that UPMC also has asked to negotiate a new access contract with UPMC Hamot in Erie, which could give Highmark customers access to that hospital after 2015.

The dismissals of the cases also would not resolve a separate, lawsuit filed by Royal Mile Co. against UPMC and Highmark. The property management company and several other private plaintiffs accuse both nonprofits of using their near-monopoly power to jack up health care costs.

Judge Conti has given attorneys in that lawsuit until early next week to file an amended complaint, after finding that their original complaint asked her to second-guess state insurance regulators.

In that matter, UPMC and Highmark are on the same side, opposed to Royal Mile's lawsuit.

Rich Lord: rlord@post-gazette.com, 412-263-1542 or on Twitter @richelord.

Rich Lord: rlord@post-gazette.com, 412-263-1542 or Twitter @richelord. First Published October 23, 2013 12:20 PM

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